Cdnow Case Study Summary

With the presence of more than 1.6 million commercial sites, E-tellers are facing fierce competition to attract the new customers and make them purchase. But in the near future only those companies will survive who are able to reduce the customer acquisition costs. The research reveals that CDnow’s by developing multifaceted, integrated customer acquisition strategy was able to understand the economies of online business.
The problem with banner Ads
Jason and Matthew created CDnow in Pennsylvania to provide music buyers with knowledgeable recommendations, convenience and large selection. With the emergence of Web as a platform for commerce, like many other E-tellers, CDnow also saw Banner Ads as a great way to promote its site to the Web
But soon, they realized that there was no guarantee on click-through and impressions to purchase in spite of the some sort of guarantees by Web Publishers. For the sake of argument, let’s consider the Web publisher demanded CDnow $70 for every 1000 visitors who were exposed to its banner ads. This meant CDnow was paying $0.07 i.e. 7cents for each visitor exposed to ads. Let’s also assume that only 1% of the people who saw ad clicked through to CDnow’s website. This meant that CDnow was paying $7 for every visitor of site ($70 for 1%of1000 visitors; i.e. 1 visitor costs $7). Now, let’s also consider 1% percentage of visitors who visited, actually purchased. On calculation (1% of (1%of1000) visitors cost $70), we conclude that CDnow had to pay $700 for acquiring new customer which is quite
In November 1994, CDnow thought to bring a new concept in web called BuyWeb program which is now referred as affiliate or associate marketing programs.
Geffen Records was operating as a promoted the artists and their recordings through a Website. This Company wanted to provide the fans an easy access to buy music but no internet in building fulfillment operation. So, CDnow was called upon and these two companies agreed that Geffen would put links on its site to carry fans directly to the Web pages devoted to Geffen artists at CDnow’s site. CDnow realized the concept underlying Geffen arrangement had much broader implications as a marketing tool as the sales were higher than before.
There was always an option for CDnow to start a program that would motivate other Websites to put up links that discussed or reviewed music to its site. Thus was born Buy Web, the Web’s earliest and arguably the most successful affiliate